tv [untitled] June 6, 2012 7:30pm-8:00pm EDT
can be used to do with the data. seems like there's -- you know, i think mr. hall described the way, what happened, how this thing first came about 40 years ago. and now technology has changed dramatically since then. would you agree with that? then i'll go to you, mr. moss. >> congressman, the department of labor has a master switch that controls communications in to and out of the room. no news headline or story can be published until the labor official literally flicks that master switch at 8:30. >> do you have a comment? >> just that, that's absolutely true. one of my concerns, though, one of my concerns with the lockup room came from a number of incidents over the past few years that involved this struggling with the technology
coming out. and i do think that there is a need to sort of at a minimum really review the security in that lockup room. >> congressman, i would add, that's why, you know, these discussions we've been having with the labor department have focused on that. they have needs and as we said, i said in my testimony we understand they have the responsibility and the right to set up lockup rules and -- i think our view would be that the april 10th announcement, plan, whatever you call it, didn't strike that balance. we're hoping to in these negotiations. >> i'm hoping that happens, too. i'm going to urge the secretary to try to move that along so that you all can come up with an agreement. because sometimes i think it's a matter of people sitting down and working out things, not everything has to be legislated. it moves a lot slower when you have to depend on the legislature. but according to a joint news statement issued december 9, 2008, by the then commissioner
of bureau statistics keith hall and then assistant secretary of labor for public affairs data from the november 2008 employment news report that was scheduled for release friday, december 5, 8:30 a.m., eastern standard time was inadvertently transmitted from the lockup facility approximately 25 seconds. the news release states that a similar early transmittal occurred on december 3, 2008, involving the data on productivity and costs. the news release clarifies that a wire service -- quote, a wire service bureau chief informed us his outlet released early to subscribers on both occasions end of quote and that the department of labor confirmed this claim. finally the news release states the early transmissions were accidental and followed a recent technical change in hardware configuration. dr. hall, you were with the
department at that time, at the time these leaks occurred. >> correct. >> what can you tell us, specifically, about how that occurred and how were the leaks accidental and what circumstances allowed such accidental leaks to take place? >> as i recall, the news agency was allowed access to the room without any bls technicians and they replaced a cable from the computer to the box. it turns out that cable bypassed the security on the box, so -- the company didn't mean to do that. they were trying to increase their connectivity i suppose. so since then we've tried very hard to, well, we'd still -- one of my proposals to not let people in the room and mess with the equipment without a technician there. >> those leaks, were they detected at the time they occurred? >> they were not.
>> you write in your testimony, thompson reuters takes embargoes seriously, we have always intended to comply to the department's lockup procedure but our company after a hardware reconfiguration did inadvertently uncover a defect in the equipment that resulted in two early releases of data from our machines in the labor lockup in late 2008. what can you add to what mr. hall said about how the leak occurred, also your statement indicates, quote, a defect in the department's equipment resulted in two unintentional early releases end of quote, was the fault in this matter with the department or with your firm? >> my understanding, and i wasn't part of this at the time, but my understanding is that perhaps shared. we did reconfigure our hardware, my understanding is that the way that interfaced with the lock
box and how that was cabled in the department led to the inadvertent releases. as i say, and mr. hall said, the first release wasn't detected by anyone, certainly wasn't by us, the second we realized and immediately made that known to the department. we worked with them to figure out what the problem was. a fix was implemented and as i say in my testimony, we're aware of no other issues in the 3 1/2 years since. the department has 8 to 10 lockups a month so that would be roughly 350 lockups or so since there was that problem. >> dr. hall, as a former commissioner of the bls, do you believe that steps the department of labor announced to improve the security of economic data during the prerelease embargo period are necessary? >> i think most of them are necessary. the one aspect would be replacing the equipment. that's a pretty dramatic step.
i do think that was worth considering, and i do think that is a possible solution. i also think it's a possible solution to release the data on the website and then open up the lockup room so it runs a little bit behind the website so people get to write their stories and get it out. but there won't be quite such a rush to move trading from inside the lockup room. i'm not sure for sure, i think it's something that should be done, i think it should be considered and should be discussed. >> thank you. >> thank you. just for the record, when these lapses occurred, who was president of the united states? >> i believe it was during the obama administration. but we did have a lapse, to be fair -- >> november 2008. who was president. >> i'm sorry. it was 2008, that was -- >> i want to make sure we understand that this is so long ago that president bush is responsible for the leak and yet 3 1/2 years later we've got a
fix proposed. i guess that's quick and dramatic action. tomorrow federal reserve chairman ben bernanke addresses the joint economic committee. live coverage at 10:00 a.m. eastern on c-span3. tomorrow attorney general eric holder testifies about his agency before the house judiciary committee. you can see live starting at 9:30 a.m. eastern at c-spspan.c. the b-52, everyone thinks back to vietnam, they think linebacker operations, they think of the history of the b-52, cold war. so there's a different kind of power associated with the b-52 as opposed to other long range bombers. >> these are two friends, union and confederate, who knew each other prior to the civil war, who fought against each other at
the battle of pea ridge in 1862 and here they are at age 100 sitting on the porch talking about the old days. >> we have one to the east is marked 901. the gate to the west is marked 903. and they really reflect or reference the moment of the bomb which was at 902. >> watch for the travels of c-span's local content vehicles the first weekend of every month on book tv and american history tv and look for the history and literary culture of our next stop in jefferson city, missouri, the weekend of june 30th and july 1st. on c-span2 and 3. today the senate banking housing and urban affairs committee held a hearing on implementing the dodd-frank financial regulation law. next, a portion of that hearing with deputy treasury secretary neal wolin. >> mr. curry, it is clear from your testimo.p. morgan lacked t
appropriate such a large loss. what shoot bank have done differently?jt.p. morgan lacked appropriate such a large loss. what shoot bank have done differently?.p. morgan lacked t appropriate such a large loss. what shoot bank have done differently? >> in essence we believe that the issue at jpmorgan chase is one of inadequate risk management within the office of the chief investment office. we have been focusing on potential gaps or deviations from accepted standards of risk management within that particular office in looking to see whether similar gaps exist in any other area of jpmorgan's risk management architecture. >> mr. curry, the occ has dozens and dozens of examiners at
jpmorgan. first did your agency check the risk management and internal controls of all aspects of the bank, including the chief investment office before this event, or did you miss this, and second, while regulators are not in the position to review every single trade, what assurances can you give us that the bank regulators will be able to monitor situations where large trades whether done for hedging or other purposes could bring down a firm or have a systemic impact on the broader economy? >> one of the major focuses of our examination and supervision activities is risk management. we look at risk management in the entire organization and within key areas where there's a
substantial risk facing the institution. that process is intended to go across the entire organization in those key areas. in this particular case, we are looking at whether there were gaps within our assessment of the risks and the risk controls in place in the chief -- the cio office. we are in the process of evaluating that in our ongoing examination p .point i would make in terms of our focus on risk management is that it is one part of toverall approach t identifying risks in the organization. as governor tarullo mentioned, a key component of how we assess and mitigate risks in the institutions is the institution's capital levels, their level of reserves, and their liquidity. in the case of jpmorgan chase, their capital levels and liquidity are substantially
higher than they were at the beginning of the financial crisis and as i mentioned in both my oral and written comments, they are more than sufficient to withstand the reported losses in this particular particular area. we are continuing to review as part of one of the two prongs of our ongoing review is what exactly transpired with the trading operation within the cio's office. and we are looking to make sure that there were appropriate limits and controls on those activities in that area and how they compared to other similar areas within the organization. >> it is important that wall street reform implementation is completed to enhance financial stability and reduce systemic risk. secretary wolin, just to be
clear, doesn't that seem to be that the jpmorgan loss was systemic. do you agree and what do you believe are the implications of the recent losses at jpmorgan on the wall street reform that have yet to be completed? >> hang you, mr. chairman, for that question. obviously the loss at jpmorgan chase was a big loss and one thatthang you, mr. chairman, fo that question. obviously the loss at jpmorgan chase was a big loss and one thathang you, mr. chairman, for that question. obviously the loss at jpmorgan chase was a big loss and one thatahkhang you, mr. chairman, for that question. obviously the loss at jpmorgan chase was a big loss and one thathang you, mr. chairman, for that question. obviously the loss at jpmorgan chase was a big loss and one thatang you, mr. chairman, for that question. obviously the loss at jpmorgan chase was a big loss and one thatanhang you, mr. chairman, for that question. obviously the loss at jpmorgan chase was a big loss and one thatkhang you, mr. chairman, fhang you, mr. chairman, for that question. obviously the loss at jpmorgan chase was a big loss and one thatnkhang you, mr. chairman, for that question. obviously the loss at jpmorgan chase was a big loss and one thatang you, mr. chairman, for that question. obviously the loss at jpmorgan chase was a big loss and one thatng you, mr. chairman, for that question. broader financial system. what's clear is that the lessons that we all learned from what happened at jpmorgan chase will serve as important lessons, insights into the range of dodd-frank implementation work to come, whether the volcker rule or questions about risk management or enhanced prudential standards or for that
matter capital. and i think this incident underscores the need for us to pay attention to examples like this in order to learn those lessons, both with respect to dodd-frank implementation and as i suggested earlier the broader efforts of supervision that are ongoing. >> secretary wolin, are regulators better coordinated and prepared after wall street reform to deal with external threats to our financial stability and economic growth like the eurozone crisis, what steps are you taking in response to this crisis? >> i think there's no question that the various banking and market regulators of the u.s. government have an opportunity to constantly monitor financial markets and the exposures of our banks and our broader financial system to what is going on in
europe. the financial oversight council has spent a lot of time on europe and thinking through what its implications are and what might be to our financial system, that work of course is ongoing. but i think for the first time this council really gives the range of relevant entities of the u.s. government the capacity to share perspectives, to work together in engaging counterparts in europe to make sure that we are as well prepared and have thought through the various could not i contingencies that might be necessary. >> governor tarullo, do you have anything to add?necessary. >> governor tarullo, do you have anything to add?ontingencies th necessary. >> governor tarullo, do you have anything to add?necessary. >> governor tarullo, do you have anything to add? >> one hinge about the eurozone problem, they have been with us for some time, as a result of which we have been able to regularize a system of oversight of u.s. financial institution exposures and activities in
europe. so right after the first greek problems arose in may of 2010, on an ad hoc basis, we began looking at these. what we've been able to do is put in place a system that allows us to check the positions and exposures of individual firms against aggregated data, whether from market sources or from supervisory sources just on it make sure that both we and the firms have a handle on what is going on. other than that i'd concur with what secretary wolin said. >> senator shelby. >> thank you. i think it's kind of a given here from what i read and what i know, stress test jpmorgan went through and so forth, that they have more than adequate capital. i've been told that they would have to sustain losses 40 times, in other words, $70 billion, $80 billion in order to -- and they
would still be standing. is that about right, governor tarullo? >> senator, in the stress test where what we did with the trading book was to assume an instantaneous shock based on our adverse scenario which entailed trading losses of $28 billion. we also assumed credit losses of $56 billion, the sum of those gives the approximately the number you indicated. >> comptroller curry, tell us just walk us through from what you nknow what was going on at jpmorgan. you know, were they managing risk, were they making money, were they doing a combination? everybody's got to measure risk, but in other words, what was really going on? you had people on site, right?
>> that's correct. >> so they took a position. was that a position to manage something that they had already done or could you explain to us? >> that's actually the key question that we're trying to address, senator. this really is what actually happened in this particular investment strategy. and it's a very complicated investment strategy both in terms of its size as well as complexity. we are looking to determine what the actual strategy behind that investment scheme was and also if there were any other factors that were driving that strategy other than attempting to mitigate known risks in the bank's portfolio. >> whether it's the banking
arena or some other arena, but especially in the area of derivatives and so forth, you you take a position, somebody else has another position, right? >> yes. >> so if you win, you're looking great. you're look smart. if you lose, you're maybe not -- having a bad day. but you're not trying to take risk out of the market, are you? >> not necessarily. >> what are you really trying to do? from my perspective, i think banks ought to be able to take risks. they ought to manage those risks. the regulators ought to make sure that they know what's going on from your perspective and the fed's perspective of any huge risks they take, that it might, what, endanger the taxpayer. a lot of us, maybe not even, but a lot of us are worried about the taxpayer and bailouts and future bailouts.
jpmorgan, as strong as they are, seems from your testimony and others and what we know would you say never lost 2 billion or 4 billion or what. that's a lot of money to me. and i guess it's a lot of money to them. what did the comptroller's office know, and were you on top of things? how many people did you have at jpmorgan kind of supervising or watching this? >> let me address the issue of supervisory strategy, with respect to risk management first. we're looking for the institution to identify and address the potential for a serious risk within the organization. we're really not looking to eliminate all risk. if you did, so you wouldn't have a bank, the nature of the bank is to manage risk and be
profitable. the role of capital is really to absorb those area where's risk is either unavoidable or occurs just because of the nature of the business. in the case of jpmorgan's national bank, there is ample capital, there's over $101 billion worth of capital, just backing the national bank, not the holding company. with respect to the actual supervision of jpmorgan chase. we had 65 individuals who are a core team examiners who are resident at the institution. on top of that, we are able to draw upon a considerable reservoir of skilled individuals with with expertise and a variety of credit, market -- capital markets and other areas that are brought in as a
targeted example on an as needed basis. >> we with also work in cooperation with the federal reserve system which also supervises the holding company. in terms of this particular invest investment situation at the cio's office, we did begin to examine this early in april. we are interested and concerned intensified during the month august as losses increased. within the portfolio. up to the point that the institution itself announced the significance of the losses that were with incurred. since that point in time, we've -- our focus has been on managing and monitoring the
banksests to mitigate our deep risk, that particular portfolio with the objective of ensuring that there's a soft landing of that particular position. and to minimize risks of the institution and the deposit insurance fun. >> when do you think you will finish your analysis of what really happened and all this? >> we hope to do that as quickly as possible. and we also hope to use our findings to inform us as to what potential implications there are for the other institutions that we supervise our large bank cadre of institutions. >> senator reid. >> thank you very much. mr. curry. you have 65 personnel devoted to
supervision, how many are in london? >> we have five individuals who reside or are housed in our lorn don office. >> and they're responsible for how many insti toogss? >> they're responsible for any national bank that has a global operation. especially with the presence in london, a london branch office. >> how many would that be roughly? >> that would be roughly a half dozen institutions. >> a half dozen? >> how common is it to have the risk office of the national bank located outside of the united states? >> in this particular case, the risk office is actually housed in new york, where the global operations of the cio office are housed. so from a supervisory standpoint, or focus in supervising that and other global issues is really directed
from our resident team in new york. >> one of the impressions you get from the press, though, is that the office in london actually was -- had significant responsibilities with the overall bank. the justification has been made that they were taking these hedge positions, take these investment positions to protect the bank from the overall portfolio of the bank, which is essential risk operation. can you explain? >> the individuals that are responsible for managing the risk and establishing the parameters for the activities that may occur in the london office are housed in new york. and that is where the physical focus of our activity has been. >> and they reported directly to the chief management or? >> the the chief executive officer, yes. >> you're confident from your
review that they had complete authority to countermand the operations in london? >> that is one of the focuses of our review, is to determine the accountability, the involvement of management in supervising the design of the risk management controls and their monitoring of it. >> when the model for risk was changed were you aware of that change? did you evaluate the new model? it took place prior to your assuming these duties, i understand that. you came on board about april 9th and aprilth was the first indication of difficulties. but was that -- i think the determined model, was it evaluated by occ? >> there are hundreds if not thousands of models that are employed by large financial
institutions to measure and monitor a variety of risks or other functions in the institution. under the authority of the applicable capital regulations, we are required to approve their capital related models. there are other models that may have -- be at issue here, management related models or other models that would have been involved in this particular situation. we would not have had an express approval requirement of those models, but we would locally have been aware with of them. and we're looking sat our procedures for evaluating other types of models that used by an institution such as jpmorgan chase. i would point out that a year ago, last april, the occ did publish written formal guidance on the use of models by occ
supervised institutions. and that guidance does outline the pitfalls and areas in which banks and bank management must assess if the use of models and measuring risk throughout the organization. >> first of all, and reit now we face a serious challenge in europe, with european banks, who seem to be in a much more adverse condition than the united states banking industry based on capital, and any other measures as the governor's testimony. to what had dodd frank improved our banking situation and put us in a stronger position? >> i think that both dodd frank and the ability of the financial oversite council to come together and discuss and understand these things. but also the work of the fed and other regulators sitting at this table to undergo the stress
tests that have been at the core of making sure that our banking system is well capitalized and well cushioned from the kinds of exposures that may have otherwise been important aspects of our being in a much better position than we were before dodd frank and frankly in a much better position than our counterparts in europe? >> is that your view, governor? >> yes, senator, i think that beginning in 2008 and with the hearings that were conducted by this committee and your counterparts in the house in 2009 on reform, there was just a sea change in attitudes and orientation, both with respect to existing authorities and with the use of new authorities. and as the secretary indicated, particularly with respect to stress testing, capital requirements, which, of course, are embedded now in 165 of dodd